Governor Gavin Newsom released his proposed 2026-2027 budget on January 9, 2026. The Governor’s budget proposes $348.9 billion in total state spending, up from $321.1 billion total state funds in last year’s enacted budget. However, it does not include significant expansion of services or programs for people with disabilities and leaves funding gaps in future years for vital programs and services. Read the Governor's Budget Summary 2026-27.

What has been released so far is just the first batch of budget proposals for this year. Trailer bill language, which make changes to state law necessary to implement policies reflected in the budget, will be posted in February. Over the next several months, the Legislature will hold hearings on the proposed budget. The Administration will release a revised budget (the “May Revision”) by mid May, and the deadline for finalizing the budget is in mid June. Learn more about the California budget process.

Overall, this proposed budget paints a rosier picture than the reality we are facing and fails to address challenges we know we will face. For example, the Governor’s proposed budget projects a $2.9 billion deficit, while the nonpartisan Legislative Analyst’s Office (LAO) estimates a much larger $18 billion deficit. Additionally, as the state braces for the impact of federal cuts to programs and services in healthcare, education, housing/homelessness, and more, this proposed budget does not attempt to make up the difference. Given this, we anticipate a May Revision that will have more funding cuts and policy changes than the current proposal.

Disability Rights California will continue to advocate to protect programs and services for people with disabilities and looks forward to engaging with the Administration and the Legislature through this budget process.

Below are our high-level takeaways from the Governor's January budget proposal as of January 14, 2026. As we continue to gather information, we will continue to keep the community informed and updated.

The following are some of the key items in the proposed Budget impacting persons with disabilities and the programs that assist them:

Department of Developmental Services (DDS)

The Department of Developmental Services has a proposed budget of $21.1 billion, an increase from the previous year by $2.4 billion. This increase is largely due to an increase in projected caseload from 489,254 to 526,848 individuals with intellectual and developmental disabilities served by the regional center system.

Notable changes in spending for the upcoming year include:

• A decrease in $8.1 million due to Fairview Developmental Center being fully shut down.
• A decrease in $22.5 million in Self-Determination Program spending due to policy changes from the previous year.

DDS proposed two key policy changes through the budget. Additional details about these proposals will be in Trailer Bill Language (TBL) that we expect in February:

• Improved collaboration between DDS and DOR to better facilitate employment services for people served by both agencies.
• Changes to the 4731 complaint process to align with the Federal Access Rule.

DDS is also continuing to implement changes to the Self-Determination Program enacted through last year’s budget that are expected to result in cost savings.

Department of Rehabilitation (DOR)

The Governor’s Budget includes an additional $60 million ongoing in federal funds for increased capacity of vocational rehabilitation. This increase reflects more demand for employment services from people with disabilities.

Education

The Governor’s proposed 2026–27 budget continues to make K–12 education a central funding priority through Proposition 98, the constitutional guarantee that sets minimum funding levels for schools and community colleges. The budget proposes $125.5 billion in Proposition 98 funding and $149.1 billion in total TK–12 (transitional kindergarten) education funding when all sources are included at $20,427 from Prop 98, and $27,418 from all sources, resulting in the highest levels California has ever seen. Overall, the proposal reflects a continuation of major education investments made over the past several years.

The proposed budget maintains and expands several education programs focused on student support and equity. These investments matter significantly because students with disabilities benefit greatly from school environments that prioritize whole child support, coordination of services, and family engagement. Specifically, the proposed budget includes:

• $1 billion to expand the community schools model, which integrates academic instruction with health, mental health, and social services, and additional funding to fully equalize special education base rates across school districts.
• Changes to K–12 governance intended to improve coordination and accountability across California’s education system.
• $3.6 million General Fund in 2026-27, and $2.8 million General Fund in 2027-28, and ongoing, to establish the Office of Civil Rights (OCR) within The Government Operations Agency (GovOps). The OCR will provide educational resources, training, and technical assistance to local educational agencies to prevent and address discrimination and bias within California’s TK-12 education.

Labor and Workforce Development

The Governor’s proposed budget highlights continued investments in labor and workforce development programs intended to support job training, employment pathways, and economic opportunity. Collectively, these investments are intended to strengthen system capacity, improve efficiency, and respond to increased demand across labor and workforce programs. The budget proposal:

• Builds on prior state and federal investments in workforce training, including apprenticeships for individuals facing barriers to employment. These initiatives are aimed at connecting workers to skills training and job opportunities in a range of industries, including healthcare, manufacturing, and other high-demand sectors.
• Includes funding focused on the administration and enforcement of labor protections. This includes resources to cover interest on the state’s Unemployment Insurance Trust Fund loan, continued modernization of Employment Development Department systems, and investments to improve worker health and safety enforcement through Cal/OSHA.
• Provides additional staffing and funding to address growing caseloads in the Subsequent Injuries Benefits Trust Fund, which provides benefits to injured workers.

Healthcare/Home and Community-Based Services (HCBS)

This budget includes $143.3 billion in funding for the Health and Human Services Agency.

Medi-Cal

• Last year, Congress passed HR 1, which substantially reduced funding for vital health and human services. As a result, California could lose up to $30 billion in funding for Medi-Cal each year, with as many as 3.4 million people losing coverage.
• Unfortunately, the Governor’s proposed budget does not account for this substantial cut or backfill these services. It also adds federal work requirements for immigrants accessing state-only Medi-Cal, a program not impacted by HR 1. This will result in even more people losing access. Immigrants’ lives and wellbeing are endangered by the federal government; now is not the time to remove their access to healthcare.
• The proposed budget further endangers immigrant health by failing to maintain full-scope Medi-Cal coverage for certain immigrant groups who will lose federal Medicaid coverage due to HR 1 in October 2026. This group, which includes refugees, asylees, and domestic violence survivors, will be shifted to restricted-scope Medi-Cal, which only provides coverage in an emergency.
• There will be an additional $373 million cut to Medi-Cal in 2026-27 because of new federal work and community engagement requirements that narrow eligibility.

Other Healthcare

Premiums for Californians purchasing health coverage through Covered California (California’s ACA marketplace) are expected to increase by an average of 97% - another consequence of HR 1 not addressed by the budget.

In-Home Supportive Services (IHSS)

In-Home Supportive Services (IHSS) is a Medi-Cal program that allows people with disabilities and older adults to access help with services like personal care, housework and accompaniment to medical appointments, allowing them to continue living in their homes. This budget makes several changes that are likely to make it harder to access care through the IHSS program.

• The proposed budget would shift $233.6 million in costs for increased IHSS hours from the state to the individual counties administering the IHSS program. Currently, if a person becomes eligible for more IHSS hours, the state is responsible for paying the cost of those hours. With this budget proposal, that cost would shift to the counties. While the full impact is unclear, counties are already facing significant financial challenges, and this change will create an incentive to lower the amount of IHSS authorized for individual recipients.
• The budget proposed to eliminate the IHSS Backup Provider System beginning in 2026-27, with a cost savings of $3.5M. This program is meant to provide temporary backup care for IHSS recipients when their primary provider is not available.
• The budget proposes to immediately terminate a person’s IHSS benefit when their Medi-Cal is discontinued. This is a change from the current system which allows IHSS benefits to continue temporarily by moving individuals who have lost their Medi-Cal into the IHSS- Residual program. This change will result in savings of $68M in 2026-27.

Housing and Homelessness

Housing

Regarding housing, the proposed budget engages in reorganizing but appears to not make a meaningful increased investment. The Governor’s proposed budget includes:

• Implementing the new California Housing and Homelessness Agency (CHHA) and the Housing Development and Finance Committee (HDFC), as part of the Governor’s Reorganization Plan. The impacts of this reorganization are still to be determined.
• $2.25 billion Homekey+, the housing bond funded by Proposition 1 (Prop 1) to develop and expand housing and services for veterans and people with mental health disabilities or substance use disorder. Of course, this is not new funding. It is a reallocation of existing dollars from a voter-approved millionaire’s tax.

The proposed budget does not include new investments to housing programs, and several affordable housing programs appear to not receive any new funding not already required. This includes LIHTC (the Low-Income Housing Tax Credits). LIHTC housing is often the main accessible option because it is the main type of “affordable” housing that has been built since the ADA (Americans with Disabilities Act) design rules went into effect.

Homelessness

Regarding homelessness, the proposed budget does not appear to attempt to make up for Federal funding cuts to Continuums of Care, emergency housing vouchers, or other housing assistance programs.

The Governor’s proposed budget includes:

• A seventh round of Homeless Housing, Assistance, and Prevention (HHAP) of $500 million, a 50% reduction from previous years. Additionally, this year’s proposed budget includes language that the funding depends on meeting additional accountability and performance requirements.
• $1 billion for the Encampment Resolution Fund. With the stated goal of providing services and housing to help people transition from homelessness, we know from members of the community that encampments that are swept are left with little, and few if anyone has been connected to housing.

Mental Health

Mental health and behavioral health are touched on in numerous portions of the proposed budget, including the Department of Public Health, Department of Health Care Services, Housing and Homelessness, Department of Corrections and Rehabilitation, and the Judicial Branch.

Community-Based Mental Health Services

In response to expiring federal funding, the proposed budget converts a statewide community-based mobile crisis service requirement to an optional benefit. Additional details about this proposal will be in Trailer Bill Language (TBL) that we expect in February.

The Department of Health Care Services (DHCS) proposed budget also includes:

• Increased 988 funding from $30.7 million to $67.3 million and increasing staff to add eight new permanent positions to support crisis centers. This funding proposal comes on the heels of drastic budget cuts to peer-run warmlines.
• Cuts to community-based mental health programs and services which are especially concerning as we continue to face cuts at the federal level.

Implementation of Mental Health Legislation

The Governor’s proposed January budget includes:

• $32.9 million for CARE (Community Assistance, Recovery & Empowerment) Court implementation, as well as $17.4 million to support legal counsel for CARE participants. This past legislative session, the Assembly Judiciary Committee found that CARE Court cost $713,000 per participant, per year.
• $4.25 million General Fund request from the Judicial Council to implement SB 820 (expanded use of involuntary psychiatric medication in county jails), which DRC opposed.

Institutional Settings

The proposed budget shifts Department of State Hospitals (DSH) funding from jail-based treatment programs to community-based IST (incompetent to stand trial) programs. It also continues to invest in providing mental health services in jails and prison, including $4.1 billion for the Department of Corrections and Rehabilitation (CDCR) health care programs and $8.9 million to expand use of telemental health services, bringing CDCR’s total ongoing mental health budget to $126.1 million General Fund.